Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold gained 0.4% to close near $1,876 after a post-Fed rally in stocks reversed into steep losses, lifting alternative assets despite a rise in Treasury yields and the dollar. The metal briefly traded about $1,900 midday before pulling back on profit-taking.

The Fed raised interest rates yesterday by 50 basis points, the biggest hike in 22 years, and began reducing its $9 trillion balance sheet to tame the fiercest inflation in 40 years. Strong measures, but not as aggressive as many market participants feared.

In his post-meeting press conference, Fed Chair Jerome Powell reassured investors with a somewhat dovish message about future rate increases, saying hikes of 75 basis points are not in the cards. The Fed will also ease into quantitative tightening by removing $47.5 billion per month, half of most forecasts.

Wall Street initially rejoiced, with all three major indexes rallying around 2.8% after Powell's comments. But one day later, relief has turned to anxiety as investors still face the sobering reality of rising inflation, sharply higher interest rates, political uncertainty in Ukraine, and a slowing global economy.

The Dow dumped 3.3% while the S&P 500 lost 3.8% and the Nasdaq 5%. Gold gathered safety bids from this outright rejection of risk despite higher yields and a stronger dollar.

Benchmark 10-year Treasury yields pushed back above 3% on the prospect of higher interest rates and rising inflation. Higher yields create a headwind for gold because they increase the opportunity cost for holding it instead of bonds.

The dollar rebound 1.1% against major rivals as Forex traders speculated that the Fed may outpace its peers in tightening monetary policy. A stronger dollar caps gold's gains by making it pricier overseas.

The other precious metals were mixed, with silver adding 0.2% while platinum and palladium fell 0.6% and 2.6%, respectively.

At the Comex close: June gold gains $6.90 to $1,875.70; July silver added 4 cents, to $22.44; July platinum dropped $6.20 to $973.40; and June palladium shed $58.60 to $2,177.40 an ounce.